A Resurrection for Buried Heat - The Potential of Geothermal Energy in the United States Portfolio (11/08)

The following column by AGI/AIPG Geoscience & Public Policy Intern Jillian Luchner is reprinted from the November/December 2008 issue of The Professional
Geologist, a publication of the American Institute
of Professional Geologists . It is reprinted with permission.

Geothermal Recent History
Geothermal energy has been stagnating. After seeing an initial period of rapid growth between the 1970’s and early 1990’s, lower fossil fuel energy prices and lack of government support curtailed its competitiveness. Between 2002 and 2006, the Energy Information Administration reported just 0.05% increase in geothermal production and overall, geothermal is responsible for just about 0.03% of total U.S. electricity generation. Only now, with rising and unpredictable fossil fuel prices paired with growing consideration for the effects of climate change and air quality, are the turbines once again turning in favor of geothermal.

Geothermal power generation, which creates electricity from steam or hot water generated from Earth’s heat, does not require carbon-based fuels. As a result, the domestically produced energy source emits few to no greenhouse gases or other pollutants into the air. Land use and freshwater use as reported by the Geothermal Energy Association, are also significantly conserved compared to fossil fuels. And geothermal energy plants operate more reliably than alternate energy sources, offering a strong dependable source of base load energy.

While applauded as clean and lean, there remain some hurdles to a full throttle geothermal approach. The hurdles include higher up-front costs, inconsistent government policies, and geographic/geologic limitations, which demand new developments in technology.

The Costs
Geothermal energy requires high up front costs for exploration and plant construction. However, with no need to mine, transport and dispose of fuel for electricity production, operation costs become minimal. To help deal with costs and policy obstacles, the federal government extended a production tax credit (PTC) of 1.9 cents/KWh to geothermal electricity production in the Energy Policy Act of 2005 (EPACT). Unfortunately, the tax credit is set to expire in December of 2008.

The Potential
In response to geographic limitations, a 2006 Department of Energy (DOE) sponsored project undertook the most comprehensive geothermal resource capability assessment since the 1970’s. The final report entitled “The Future of Geothermal Energy – Impact of Enhanced Geothermal Systems (EGS)” was led by MIT Massachusetts Institute of Technology (MIT) scientist Jefferson Tester.

Developed in the 1970’s during government sponsored investigations of heat mining from “hot, dry rock” at Los Alamos National Laboratory, EGS requires a fracturing of reservoir rocks and/or an injection of fluids to create the ideal conditions of porosity, fluid flow and heat essential to geothermal electricity generation. By doing so, it allows a broader range of hot underground spaces that can act as a reservoir. Yet, though promising, questions of water availability, the fluid flow rates and the heat extraction rates in the reservoir are still being resolved. And to date, EGS has not been developed on a commercial scale.

The MIT report suggested that federal investments of $300 to $400 million over the next 15 years would make EGS technology commercially available and the energy source cost competitive. With EGS in place, the report determined, the available national heat reservoir base would total 2000 times the U.S. annual consumption of primary energy in 2005. Moreover, energy would be accessible 3-10 km below the surface in nearly every U.S. state.

The report suggests, with EGS technology between 10-20% of current U.S. electricity demand could be met with geothermal power by 2050. The goal would require an increase in current geothermal electricity production from 2800 MWe to 100,000 MWe over the next 38 years. In 2008, the DOE held a series of working groups to discuss the MIT report. Their findings, suggested the requested funding level might be insufficient, but overall found the capability to commercially produce EGS “reasonable, but optimistic.” The working groups concern that geothermal may not reach the level of potential outlined by the MIT report further suggests investment in research, development and demonstration (RD&D) is essential for geothermal to play a role in diversifying our energy portfolio.

Research, Development and Support
Almost a year after the release of the MIT report, the federal government reestablished its support for geothermal. In December of 2007, H.R. 6, the Energy Independence and Security Act (EISA) was signed into law. The law includes a new national scope for geothermal development. .

EISA contains strong support for geothermal, including the “Geopowering America” program, support for a Center for Geothermal Technology Transfer, a nationwide resource assessment, a study of geothermal environmental impacts, geothermal R&D, international efforts and advanced technologies.

Opportunities in advanced geothermal in EISA have been designated authorizations of $10 million a year for development. They include the use of heat to enhance production of oil shale and tar sands, the co-production of electricity from hot water byproducts of oil and gas extraction, valuable mineral extraction (such as lithium and zinc) from sludge residues of geopressured brines (mineral laden waters), and carbon sequestration opportunities, which may also enhance heat extraction.

Another important component of the Act is the exploration of new reservoirs for hydrothermal power (not requiring EGS). In the 1970s, the DOE ran a successful program of industry coupled drilling in which government and industry shared the costs of geothermal exploration. The resulting knowledge of reservoir locations led to substantial industry growth. By utilizing current technology, revitalized efforts in exploration have the potential to reveal new sources, not found in the 1970’s, and ready for development.

Funding for now, however, seems focused more on EGS and advanced systems. The DOE issued its first funding announcement in June 2008 offering $10.5 million in available funds to support RD&D in the EGS program. (Even private industry giant Google.Com has invested $10 million in EGS through Google.org, its philanthropic arm). And though the EISA authorizes up to $90 million a year for the geothermal program, the link with actual appropriations is tenuous. The budget request for FY09 suggests a $30 million allocation, but marks a sharp reversal by the Bush administration, which had sought to terminate the government’s geothermal research program in the previous year

Geothermal advocates are pleased, but still see much room for progress. An extension of the production tax credit was not included in EISA, though many believe it is essential to encourage investment. Additionally, geothermal would largely benefit from a federally mandated renewable portfolio standard (RPS), which requires utilities to purchase a percentage of energy from renewable sources. The MIT report recommended policies “similar to those that oil and gas and other mineral-extraction operations have received in the past including provisions for accelerated permitting and licensing, loan guarantees, depletion allowances, intangible drilling write-offs, and accelerated depreciations.” And, there is great anticipation that climate legislation, resulting in a price for carbon, would further investment in geothermal energy as well as other low carbon emitting energy technologies.

The Resurrection
Regardless of some remaining questions in science and policy, what is indisputable is that the increased attention toward geothermal electricity production has been healthy for the industry. Stagnant for many years, the Geothermal Energy Administration (GEA) now reports 20 percent industry growth in the last year alone. And as of the writing of this article, Ninety-seven new geothermal projects are now looking to come online.

This article is reprinted with permission from The Professional Geologist,
published by the American Institute of Professional Geologists. AGI gratefully
acknowledges that permission.